What is the quickest, easiest and cheapest way to buy a bond?

By Ayton MacEachern AAA
A:

Bonds usually can be purchased from a bond broker through full service or discount brokerage channels, similar to the way stocks are purchased from a stockbroker. Dealing with a bond broker can be prohibitive to some, however, because many require high minimum initial deposits. Another way to gain exposure in bonds would be to go in directly through a bond fund - a mutual fund that only purchases bonds.

When using a broker to purchase bonds, often you will be told that the trade is free of commission. What often happens, however, is that the price is marked up so that the higher price you are charged essentially includes commission fees. If the broker isn't earning anything off of the transaction, he or she probably would not offer the service. To determine the markup before purchase, look up the latest quote for the bond and use your discretion to decide whether or not the commission fee is a markup you are willing to accept. (To learn more about what to look for in a broker, make sure to read our related article Evaluating Your Broker.)

Government bonds work slightly different than traditional bonds. Some financial institutions provide services to their clients that allow them to purchase government bonds such as Treasuries (U.S.) or Canada Savings Bonds (Canada) through their regular investment accounts. If this service is not available to you through your financial institution, these securities can be purchased directly from the government. In the U.S., bonds can be purchased through TreasuryDirect.

To learn more about bonds, how they work, and how to obtain them, be sure to check out our Bond Basics Tutorial.

RELATED FAQS

  1. How do I use Positive Volume Index (PVI) for creating a forex trading strategy?

    Understand the basics of the positive volume index and how investors in the forex markets use this contrarian indicator to ...
  2. What legal recourse do I have if the counterparty in a debenture agreement does not ...

    Understand the risks and benefits of debenture agreements, and what legal recourse you have should the other party fail to ...
  3. How can I use alpha in conjunction with the Treynor Ratio?

    Learn about alpha and the Treynor ratio and how these metrics are used to assess investment strategy by comparing portfolio ...
  4. How is standard deviation used to determine risk?

    Understand the basics of calculation and interpretation of standard deviation and how it is used to measure risk in the investment ...
RELATED TERMS
  1. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  3. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  4. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  5. Series I Bond

    A non-marketable, interest-bearing U.S. government savings bond ...
  6. Financial Exposure

    The amount that one stands to lose in an investment. For example, ...

You May Also Like

Related Articles
  1. Investing News

    Looking To Invest In U.S Start-Ups? ...

  2. Investing Basics

    How a Stock Buyback Works: MasterCard

  3. Trading Strategies

    Consider The Season On Trading Day

  4. Stock Analysis

    Government Bond ETFs: Pros and Cons

  5. Trading Strategies

    Harness Elliot Wave principles To Tap ...

Trading Center